Prime Minister Lucas Papademos will take part in his first two-day European Union leaders? summit, starting Thursday, as the 27-nation bloc?s politicians discuss closer fiscal governance in a bid to overcome the economic crisis that is threatening Greece, the euro and the EU itself.
The Greek government has so far remained silent on the issues up for discussion in Brussels but sources Wednesday suggested that Papademos and his team would favor the line being taken by EU officials, including European Council President Herman Van Rompuy.
German Chancellor Angela Merkel and French President Nicolas Sarkozy want eurozone states in particular to agree to greater budget discipline so that all countries are committed to keeping their public deficit to below 3 percent of gross domestic product and debt to beneath 60 percent of GDP. They believe that this should be achieved through changes to the EU treaty.
?The current crisis has mercilessly uncovered the deficiencies in the construction of economic and monetary union,? they wrote in a joint letter to Van Rompuy. ?We need more binding, and more ambitious rules and commitments for the euro-area member states… We propose that those new rules and commitments should be enshrined in the European treaties.?
Van Rompuy proposes avoiding a treaty change and modifying instead by tweaking Protocol 12, which relates to eurozone members running up budget deficits that exceed 3 percent of GDP. The European Council president also proposes changes to the stability and growth pact.
While any agreement in Brussels could have serious consequences for the euro, Greece?s main focus will be on progressing with its negotiations over private sector involvement (PSI) in its next bailout. Negotiations with private bondholders about a haircut appear to have stalled. Athens is also keen to see what, if any, progress there will be on talks regarding the strengthening of the European Financial Stability Facility, which will also be discussed in Brussels.
Papademos will arrive in the Belgian capital after all 258 ruling coalition deputies in the 300-seat Parliament voted on Tuesday night in favor of his interim government?s budget for 2012. The budget foresees some 5 billion euros in spending cuts and another 3.6 billion in tax collection. The chief aim is to report a primary budget surplus of 1.1 percent of gross domestic product next year.